Big Technology Podcast - Apple At A Crossroads: An Interview With GV Partner M.G. Siegler

Episode Date: September 9, 2020

For years, Apple had a clear identity: It was the world’s best devices maker. Today, the company is trying to balance that identity with a new emphasis on software and services. To discuss this shift and what it means for Apple’s future, I sat down with my favorite Apple writer, GV Partner M.G. Siegler, who once covered the company for Techcrunch and continues to write about it on Medium while still working his day job.

Hello, M.G. Hey, Alex. How are you? Good. I'm thinking we'll do this in three segments, one about the state of Apple, one about the epic fight that they're having with the Fortnite creator and then maybe a little bit about your career. Does that sound good? Sounds great. Okay, great. Let's roll the music. Hello and welcome to the big technology. podcast. We're into the end of our first month, and we have a great guest here to round it out.

It's M.G. Siegler. He's a partner at GV, formerly known as Google Ventures, also spent time as a reporter. So we'll see what he says about the great reporter, Venture Capitalist Divide, if he decides to comment on that. And he's also my favorite writer on Apple. I think he's the best writer on Apple out there today. So I'm sorry, Gruber. I'm sorry, German, but I think M.G. has the best pulse on the company out there. M.G., I read a ton of your work as I was reporting on Apple for always day one. And I'm always, you know, entertained by it, number one and two, just blown away by how clear your thinking is on the company. So I'm really excited to be able to speak about the company with you today. Welcome to the show. Thank you. Thank you for the kind words, Alex.

I appreciate that. Yeah. And so we, so GV as Google Ventures. How does that color your thinking on Apple? Can we accept that your take on the company is not colored by the Google lens or should we take it with a grain of salt? Yeah, it's funny. You know, so when I joined GV, when it was still Google, actually Google Ventures, you know, seven plus years ago, obviously there was a bit of a, I think a little bit of a shock in the ecosystem because, as you note, I had been covering Apple for so long for TechCrunch and, you know, for Venture Beat before. that and, you know, even post that. I was just writing a lot about Apple still. And there was always the sort of like, wow, did not expect, you know, that person to join an entity affiliated with Google. And, you know, it's been long enough now where hopefully I've still made it clear that

I can be unbiased on both sides of the equation. I think I take swipes at Apple. I think I take swipes at Google when warranted. And then I think, I think, though, you know, it's a little bit of a tricky time, though, because it does feel like Apple's in a bit of a state of flux more so than it has been. Obviously, it's the, you know, two trillion dollar company at this point. So it's in a position of power that really hasn't been seen before. And, you know, when I was starting reporting on Apple, it was still, still more or less the up-and-comer, you know, taking on, obviously, windows back in the day.

then, of course, there was the rivalry with Android and within Google and stuff. And so, yeah, it's just an interesting time for the company right now is the big behemoth that obviously a lot's going on that we're going to talk about. Yeah. And I'll just say that having read your work, like to me, I kept found myself nodding my head being like, yep, yep, this resonates, this resonates. And I think the two of us are probably more negative on Apple than the consensus. So it's kind of a lonely place to be.

And I think that when, you know, I find someone who's like, yeah, this does. doesn't make sense. And I'm like seeing it in. It's like, oh, it doesn't make sense. It feels good. Like, I don't feel like I'm entirely crazy. But people can listen to this thing and get a sense as to whether they agree with us or not on Apple. But it's always, I mean, whether Apple is on the top or the bottom, like, whether Apple is going up or the decline is like one of the more fun debates in the tech world. And the people who are against the company are generally in the minority in terms of that opinion. But, yeah, to me, there are so many things that don't make sense with the company right now. So I'm hoping we can get into. as many as possible in the time we have. Yep, sure, I think. Okay, so let's start. You know, you mentioned that Apple is in flux. One of the things that I wonder about with Apple is their identity. You know, they are at the end of the day, number one, a devices maker.

And they've written this wave to prominent by building things like the iPod, like the Mac and then like the iPhone. And, you know, I know that there's been this debate of like, when are they going to come up with something new? And of course, they've built the watch and they've built AirPods, which I call a watch for the iPhone, for iPhone owners and headphones for iPhone owners versus, you know, category shifting inventions and then of themselves, like the iPhone has been like the Mac has been. And so I sort of wonder, like companies operate in these two different phases. One is they invent and they redefine what we use. And then two is when they've built a big enough product portfolio, they start to take. take those assets and milk the assets and get every dollar they can out of them. I think the good companies never take their foot off the accelerator in terms of invention.

And a company like Microsoft is a good example of that. It did go into asset milking mode when it had Windows and all of a sudden took a look around. And it was the owner of the desktop operating system in the age of mobile and cloud. And I wonder if the same thing will happen to Apple now that it's going so hard on the iPhone, really using all of its weight right now to get as much money. as a can out of that device? And does that eventually somewhere down the line bite that company in the ass? What do you think? Yeah, I mean, so this has obviously been an argument for, you know, dating back to when Steve Jobs was even still alive, right? Like they, you know,

they famously, of course, launched the iPad a few years after the iPhone and that was sort of seen as could that be the next big thing? And it looked like it might have been out of the gate, right? It became a sort of huge new market right away. And it's still a big market, but it's sort of of, I guess, in a way, it's sort of ebden flowed. It's just a different market, of course, people figured out than what the phone was, where it's not going to be necessarily an upgrade every year device. And so, yeah, really since the launch of the iPhone, everyone's been sort of waiting to see what the next big thing would be.

I think the reality of the situation is that we're fully recognizing now that nothing is going to be as big as the iPhone was as a product category. I mean, that is really what has driven Apple to become a $2 trillion company, the biggest company of all time because they basically created a market that was unlike anything that we've seen before it. And it became the fully ubiquitous computing device that eventually everyone in the world is going to have some sort of smartphone with them. And we're already like a good portion of the way there, of course, between iOS and Android devices. And so obviously in the post jobs Apple, it has been a bit of a challenge to try to figure out what's that next

device is. And I think that in a way, it feels like they've done a good job. And Tim Cook has done a good job of figuring out how to keep the ball rolling forward on top of and augmenting the iPhone. You mentioned a bunch of the devices, I think, from the AirPods to the watch. These are all things that are directly tied to the iPhone or have been up to date. And I think, you know, the next thing, obviously, that that's rumored to be sort of closing in hardware-wise is some sort of augmented reality, you know, headset glasses device. And that still seems like it may be tied to the iPhone, though, right? Like it would use, potentially at least the first version might use the iPhone's compute power, just like the watch has, you know, sort of tethered to the phone

in order to do that. I do, I want to give Apple credit, though, because I feel like people were worried that it would not be able to sort of, you know, surpass what it had done already in the jobs world. And certainly from a business perspective, you know, we're way, way past where it was when Steve Jobs, you know, unfortunately passed away. I think the company was, you know, something at like a three or four hundred million, billion dollar market cap, which is obviously still a massive company. But now that seems quaint, right? In hindsight. now it's a two trillion dollar company. Right.

I think the number is that Tim Cook has given back more money to Apple shareholders than it was worth originally when he took it over. When he took it over, that's right, which is sort of just incredible. And you bring up Microsoft, and obviously that's an interesting analog here because, you know, I think people, myself included, would say, you know, from an outsider perspective, it looked like that during the Steve Ballmer years after Bill Gates, that basically, yeah, Microsoft was just milking the profits off of Windows. And again, they did really well from a profit perspective and the business seemed to do well.

But at the same time, like if you look at the stock and the market cap, it was very flat. It was pretty much what you would consider to be a lost decade from that perspective. There's obviously macro stuff that's involved with that. And, you know, obviously there's macro stuff that's involved with the run-up of Apple to $2 trillion. But still, I think that that's sort of indicative of the difference between the two. I think Cook as, you know, the guy who was leading operations, obviously very operations oriented person, has just been able to keep Apple humming along and figuring out exactly what they needed to do in order to keep the business growing and sort of expanding from that iPhone base, you know, whereas Ballmer was a little bit, you know, much more, I think, in the line of just milking the profits. So I think I think Cook deserves a lot more credit than. than what sort of maybe Microsoft position was in. No doubt.

But there are similarities though, right? Because you look at, you know, let's take the stock price out of the picture, right? There are, like you mentioned, there's a lot of macro factors here. I mean, does anyone think that $2 trillion is a normal valuation for Apple? Maybe a few analysts who've been betting on the stock for a long time. But it does seem like a little absurd, especially because there's only $1 trillion three months ago, four months ago. But if you look at like when it comes to building for the future, like Microsoft only, turn the corner after

Balmer left when they started investing in cloud and mobile devices. And does, so I mean, maybe I'm wrong here, but I think that Apple being so totally invested in the iPhone is missing what's going to come next. Now, we've talked about the AR glasses.

We don't really have any sense as to whether those are going to be good or not. They're probably going to be tied to the iPhone, like you said. But they've also swung amiss pretty hard at something like a voice assistant where Siri isn't very good. And both the Echo, So both, yeah, the Alexa and Google Assistant have surpassed it, again, because they viewed Syria as a feature on the iPhone as opposed to its own operating system. And they've also swung and missed on the autonomous car.

So does the company, can the company, is the company going to face this moment where they looked like when Microsoft looked around and said, we have the desktop operating system, we're already in a world that surpassed it? Or are we sort of going to be living in Apple's world from here on in? And they have the dominant device and they're the winner. I think there's a lot to unpack in there. Like, first and foremost, I agree with everything you're saying. I think that you're right that, you know, they sort of missed from a strategy perspective with Alexa, even though they were first to market, right, with really a ubiquitous voice assistant with Siri, but then, you know, Amazon came out with Alexa.

And I think they just had the right strategy, whereas Apple didn't. I think the strategy for these voice assistants, as we're seeing play out now, is to get them as ubiquitous as possible on many devices. And that's just not Apple's DNA, right, to do that, to do cheap devices. that you place all over the house. And so, you know, Apple looked around and thought, like, well, we already have a device in everyone's pocket. And so why do we need, you know, like some cheap hockey puck thing that's, you know, in,

in someone's living room or in their bedroom? Because, again, they have a device with them all the time. I just think that was a strategy mistake. And it does point to what I do think, I do worry about from Apple's perspective. I think that they have good execution capabilities as a proven time and time again. I do worry about from sort of the high-level strategy and product perspective, though, like that they're just going to sort of keep slightly missing, you know, the bigger picture of where they should be heading.

And I think it really hasn't burned them yet because, again, the iPhone is such a massive product that's unlikely to be surpassed by anything. And so I think that they can afford to miss time and time again for at least the foreseeable future. And again, it's not, you know, it's not complete strikeouts. They're just wrong on certain aspects, I think, of their strategy. And so obviously the most recent stuff has all been predicated around moving the business much more to a services-based business, which makes sense, of course, because, again, they can leverage the billion-plus devices they already have through the iPhone and the iPad and other devices that they've had. And then, of course, it's just a different model in a way akin to what Microsoft has done, right, under Satya and Adela, where, you know, they basically become a different type of business that,

that's not so predicated around Windows that has all these different sort of, you know, cloud services and things. And Apple's just doing it much more on the consumer side with various services. And, you know, you've seen the numbers. It looks like those are really compelling businesses. Again, when you're building on top of a billion plus device base, you would hope so. But, you know, I think that Apple took a while to come to the realization that that's what they needed to do.

But that is what they think they need to do now. And I think they can ride on that for at least the next few years. I do think there is a question, though, of what sort of the next trends are. And we already mentioned the voice assistants. You mentioned the cars. I mean, will they end up kicking themselves because they miss that boat? I think the jury is still out on that. They're obviously betting, though, on the sort of AR glasses as the thing that they feel like they can use as their next, you know, key point in this journey.

Right. And when you said they've, they, you don't think they're going in the direction, they should be going in all the time. Is that, is this type of stuff you're talking about AR, autonomous driving voice assistant, or is there something else that you think they should have been heading towards that they're not? No, I mean, I think that it feels like the AR, the AR stuff is, is directionally correct. I feel like that, you know, that that's still a greenfield opportunity that no one's really sort of nailed that. There have been a few attempts, Microsoft HoloLens, obviously, Google Glass back in the day, and then Magic Leap and all these other things that have come out. but it's super nascent market still, right? And obviously the best work is being done on the phone because, again, it's a ubiquitous device.

And Apple's done a lot of some of the good work on it with ARKit within iOS. And so I think that's a smart thing for them to go after. But, you know, I do think you have to wonder, like, is there something that's like a totally out of left field opportunity that they're just, you know, not thinking about? And who's to say, of course, we don't know what's going on in their secret labs necessarily. But that's what I would worry about that they, that they're not going to be. able to, you know, they're going to be side swipe by something that just totally comes out of left field that they're not quite thinking about yet. But, you know, it'll take years to see that. Yeah. And I mean, I have just a sense of reporting on their culture for the book

always day one, just like seeing how they're so, they're in such a refiners mindset where it's all about refining the iPhone and then milking that asset versus the other companies out there among the tech giants, Facebook, Google, Amazon, Microsoft. They're all in this mode of invention, and reinvention where, you know, Apple might have this natural resource curse with the iPhone. And, you know, they try to develop Siri as an iPhone feature. They tried to develop the home pod, you know, in a similar way. They try to develop the car with the same methodology as the iPhone, you know, leading with design.

So they ended up burying, at least from people I spoke with, they ended up burying some of the sensors inside the design of the car, which made life hell for the machine learning engineers because they only got, you know, a limited spectrum of vision. to work with, and the data was much more harder. Yeah, one tangible example, I think, that you sort of brought up just in passing there. I do think that they missed an opportunity, and obviously it's easy to say in hindsight, but I feel like they missed an opportunity in the living room with what they have with HomePod, which, you know, is obviously set up to be like a high-end music device, which is not too

surprising, given their history and DNA, you know, with music. And obviously they have Apple Music now and then, you know, high-end devices. and, you know, expensive hardware. At the same time, it feels like they could have really done something compelling in the living room, especially for the world in which we're currently living, where, you know, imagine if there was some home pod like device that maybe hooked up to your TV or an Apple TV, right, that was already hooked up to your TV that had, like, say, like a FaceTime camera in it.

And it could be like a great connection portal, you know, to your family and to loved ones and even to potentially work colleagues and things like that. And, you know, I mentioned I say the word portal. and that of course brings the line Facebook is doing that you know right right exactly and and you know I I sort of Facebook is a number yeah I I sort of jumped on Facebook when they first sort of came out with portal because it seemed like I mean it was it certainly seemed like it was bad timing when they launched it they were in the midst of all their privacy you know turmoil which they're still in the midst of in many ways but but in you know obviously they ended up being positioned well for

a world they could not have envisioned you know with the COVID-19 reality. that we're all living in and work from home. But at the same time, you can imagine that Apple really should have been the company doing that. They're a company that people, you know, trust, you know, with privacy much more so than many of their competitors. And again, they already have a lot of the pieces in place because they have the FaceTime, you know, software that's running on iOS devices. And so it just feels like they had an opportunity.

I don't know if it should have been the HomePod. I don't know if it should have been Apple TV. But they just, you know, just weren't in the right place, right time. And it feels like, you know, I know a lot of people right now. who would love to have something like that in the living room that's run by Apple that they maybe trust with their privacy, again, a little bit more than some of the other companies to connect with family while we're all living in this world. And again, they couldn't have predicted that world, but still, that feels like a product

that maybe Apple should have made. It seems like an obvious product for them. And then you look at the Apple battle with Facebook, and it's pretty interesting, right? Because, like, Apple doesn't waste any time jumping down Facebook's throw it on basically any mistake Facebook makes. And, you know, what you brought up is a good example. example of that, which is that Facebook really in many ways is I think Apple's biggest competitor. I mean, they look at Apple's lock-in is iMessage in many ways.

People don't want to be green bubbles. And if we use Facebook's Messenger and WhatsApp and Instagram to message people, that's going to cost Apple in the long run. And then something like Portal is another good example of that. And it's sort of interesting to see the company take the shots. I mean, Tim Cook doesn't take shots against anyone but Facebook. And I think there's a reason for that beyond. He's just so angry that Facebook doesn't live. his privacy ideals. Yeah, I mean, I definitely feel like it stems from that. But I do think that

there's been, there's been battles over the years. You know, there's, there's been reports even this week, right, because of all the stuff going on with, with Epic, which I know we're going to get to in a second. But, but, you know, as you know, like Facebook's one of the ones that's sort of rallying behind Epic. And it sort of stems back from the days, you know, when I was still on the reporting side, you know, Facebook was trying to figure out ways to get their games, because of you remember, I mean, you remember this back in the day, Facebook's, you know, much of their business was based around Zinga and all the games on their platform when they were still primarily, you know, website driven. And there was a real existential threat in how they were going to translate that to mobile when they didn't control any of the mobile operating systems. And obviously, there was Facebook phone and all the other stuff that they, you know, Facebook home, I think, and all the other stuff that they tried to do that didn't end up panning out.

But they were really trying to do, you know, and runs around Apple by using the web browser and things like that. And Apple sort of would probably try to stop them from doing that, it seems like. And, you know, and I think that bad blood has sort of just continued on and on and on. And now we're in this like this real locking of horns between the two because, like, you know, like the privacy angle is what Apple plays up the most. And Facebook has become the poster child for, you know, the unfortunate side effects of maybe if you're not. if you don't have that as much on lockdown as you should. They're a pretty good foil. I mean, I just remember, I'll tell one quick story when I was sitting down with Zuckerberg

to interview him for always day one. I was talking to him about Facebook and operating systems and how Facebook is the only tech giant without an operating system. You know, Apple has iOS, Microsoft has Windows, Amazon has Alexa, Google, I mean, has Android. And Zuckerberg just like was like holding up his phone and saying it's not how it's supposed to work. And I mean, he had an Android. And just like hearing the tone in his voice in terms of the way he speaks about Apple, I was like, man, this guy really does not like Apple at all. Yeah. And I mean, you know, you look at the app store charts over the past, you know,

decade basically since the app store launched. And Facebook's done a good job of getting all, you mentioned, you know, the handful of them that are all the top apps. And obviously they acquired many of them. But they've done a good job sort of dominating that charts for someone who doesn't control the operating system. But at the end of the day, Apple does control that operating system and Facebook is beholden to that. And so that's always going to be attention. And it was always going to be attention. And I think now is really coming to a head with everything that's going on. Totally. Okay. I'm going to ask one more question before we wrap this segment up, which is that, you know, you mentioned that Apple is now moving towards more of a service model. I mean, it definitely is going

to lead with hardware, but services way more important to its business. And like, one of the things that I've been thinking about with this is people love, people buy Apple because of the way it makes them feel. They love taking out an iPhone at a meeting. They love working at a cafe on a MacBook. There's just something about the status of using these products that make you feel good. Also, they work well. Then you look at services and it's like, does anyone feel good about paying Apple $5 a month for storage or, you know, I mean Apple Music is something that people are into because it's been the default versus Spotify and I'm curious if you think that sort of what it means for Apple if we're going to end up in a world where services is the lead for them or at least core to their

business and generally people who are interacting with it are going to feel like oh this is kind of like a necessary evil or like you know Apple is here's that a five dollar bill from Apple again on services can't believe they're you know taking my money for this also like there's definitely been at least with the people I speak with the sentiment that like Apple is doing whatever can to get money from them in every way. And I just wonder how you think people's relationship will change based off of that emphasis on services. Yeah, it's a good question because it sort of leads to the idea of like, is Apple like nickel and diming people after they've paid a thousand plus dollars, right, for their devices potentially? Are they now, you know, trying to get $5 for iCloud

and $10 for Apple Music and all this stuff? I think the answer to that, and we're going to see that soon, it sounds like, is that they're going to start to bundle things together and make it a little bit more seamless. So, you know, because I have, you know, a handful of different bills that come in from Apple when I rent a movie on iTunes, Apple Music, ICloud, like we just mentioned. And so I think if they can make it a little bit more seamless, that will alleviate some of that tension. At the end of the day, though, like, you know, what you're saying is basically right, that they need to be able to compete with the best services, not just ones that are tied, you know, very tightly to the hardware. If they're not the best, like people, you know, are going to, in the back of their

mind at least, start to, you know, not appreciate that and maybe, you know, start to, start to wander elsewhere. Like you noted, the hardware is still by far the best, it seems like, and, you know, it doesn't seem like that's sort of been shifting or anyone's worried about that changing anytime soon. And so I think the bundles will be key, but they do need, and this has been talked about in the past couple of weeks at least, you know, the idea of a linchpin for what needs to be a part of that bundle. And you'll know this, you know, on the Amazon side, obviously with Prime, because they have such an awesome experience with shipping that all the other stuff that they have a part of Prime just feels like icing on the cake. right now with Apple if they bundled anything together which again it seems like they're going to do like what is that linchpin what is that key uh part of uh the bundle and in john gruber and others have

written about this of like you know wondering what that would be right now it seems like it's apple music but you know that's honestly there's just not a great linchpin i mean it's good um but there's spotify as you know and some people are like spotify a lot more than they like apple music and so what else could it be i come back to, I think eventually it has to be the iPhone. And if you, you know, start to pay for it on a monthly cadence and it becomes part of an Apple One package that, you know, that they are rumored to be calling it, that makes some sense to me. But I think we're a ways away from doing that. I think they're going to dip their toes in the water much more easily by, again, bundling music, news

plus, which is something that certainly doesn't seem like anyone really needs. Apple TV Plus, which is doing a little bit better, but still is not a vital thing. And so they're going to have some, um, some hard decisions, though, to sort of make in terms of, like, what they do from a marketing perspective, even just like for what is a key part of that Apple One bundle. Yeah, it's right. It's like, what is Apple? That's the main thing that I've been asking myself, like, what's the identity of this company? And, you know, I'll give the company some credit.

I mean, ever since I started really digging deeply into the company for the book, I was definitely very pessimistic about them, but they have continued to do very well. And I just keep reading news about them and saying, okay. I got to hand it to Apple. This business is working. This plan is working. But there are certainly some challenges to it. So we're going to speak a little bit about how Apple and Epic the maker of Fortnite are facing off.

And one of those challenges that could really end up being a defining battle for Apple as it looks towards the rest of 2020 and ahead. So we'll be right back after this with M.G. Cigler to talk about that. Hey, everyone. Let me tell you about the Hustle Daily Show, a podcast filled with business, tech news, and original stories to keep you in the loop on what's trending. More than 2 million professionals read the hustle's daily email for its irreverent and informative takes on business and tech news. Now, they have a daily podcast called The Hustle Daily Show, where their team of writers break down the biggest business headlines in 15 minutes or less and explain why you should care about them. So, search for

the Hustle Daily Show and your favorite podcast app, like the one you're using right now. And we're back here with M.G Siegler, partner at GV, formerly known as Google Vival. Venture is also great Apple reporter back in the day at TechCrunch and Venture Beat. And also, MG, you write, like, extremely frequently. We'll talk a little bit about how you balance that in the next segment. But your work can be found. Tell everyone where you work can be found. I hate when people wait until the end to let people know where to find your stuff.

If people are still listening, they like what you're saying. They should be able to go find it. Yeah. So for the past several years, I've been just, you know, doing my own writing on the side. you know, obviously it's not the day job anymore, but still writing on the side because it helps clarify my own thoughts. And so I do that at a site that I just call 500-ish. It's 500ish.com. It's, you know, run on medium, but it's basically, you know, my own blog that I, yeah, continue to write a ton about Apple, as you might expect. But other things here and there as well. Yeah, it's always a super fun read.

One of the things that you've been covering a little bit lately is the Apple against Epic Fight. Epic is the maker of Fortnite, they tried to create a payment system that would subvert Apple's payment systems, which they have to pay 30% tax on for every dollar they get. And they try to create their own. Apple kick them off the app store. And now I think just before me, this podcast is going to come out in about a week after we record. So who knows what the heck's going to happen.

But right before we came on air, Apple is terminating Epic's developer account. So, Angie, what's your read of this fight and who do you think? think is going to win. Yeah, I mean, this is, this, I'm hesitant to even sort of try to predict at this point, because I feel like it's played out differently than I may have expected when it first kicked off. You know, I think that that Epic did sort of a rather Apple-like incredible job of sort of trolling Apple with obviously the 1984 spoof ad and just sort of, you know, like caught them by surprise, I think a little bit with, as you noted, rolling out. Where they had a fortnight Yeah, sorry, I just want to make sure that we get the context.

They had a Fortnite character basically walk into the same setting as the 1984 ad, like a unicorn sledgehammer and throw it at an Apple that looked a little bit like Tim Cook, who was talking the same way the character from 1984 ad was basically, you know, Apple was saying we were the upstart, stop listening to big computing like IBM and now Fortnite saying, you look at Apple, you've become exactly the same problem that you were trying to fight back in the end. Okay, sorry, you can go ahead. I just wanted to make sure to give that context. Yeah. No, it's important context because ultimately what it feels like that Epic and Apple are fighting,

they're basically fighting sort of a PR and marketing warfare, which is interesting because that has been Apple's home turf historically, right? Like Apple gets great press. They obviously do great marketing and how is Epic going to sort of go at them? And they just went straight at them in their seeming position of strength. And, you know, to my, to my eyes, they've done a really good job of it so far. I think that they're really challenging Apple and making people sort of choose one side or the other. It feels like that this is, this, Apple's obviously taking this very, very seriously and you can see it in their actions. Not only the fact that, as you noted, they just terminated Epic's accounts. And, you know, it's a little bit more nuance than that because, you know,

As you've heard of the past few days, it seems like that the judge that this ultimately went to decided that it was okay if Apple wanted to just sort of keep Fortnite the game off of the App Store, but they weren't able to stop people from using the Unreal Engine, which powers a lot of different types of games by many different people. But still, terminating that developer certificate is a big deal because it means that now we're sort of past the point of no return where Epic can't even update Fortnite. which, as you know, they just rolled out a big update for everyone that's not on iOS devices to be able to play, you know, the newest iteration of the season with, I think, Marvel characters now. And so, you know, iOS is sort of being sandboxed. You can still use it if you had it previously installed, but you're not playing the new contents and you're not playing against the world. You're playing against only other iOS users. And so Apple's clearly taking this seriously and not backing down. And it seems like Epic, it's also taking this seriously and not backing down.

I would have expected one of them to back down by this point, just given the stakes that are at play. But, you know, I think Apple views this as sort of a threat for the reason that we were talking about earlier. This is a huge part of the services narrative is the 30% cut. And it's bigger than that because obviously everyone talks about the 30% cut. And that does matter. And I think that that is, you know, sort of in flux and on top of a lot of people's mind because it's the most forward-facing part of the equation. But the bigger part is also, like what Epic did is, you know, try to use their own payment method to be able to get people to pay them directly and not have to have to pay any cut to Apple. And obviously Apple's not going to be okay with that because, again, these payments, no matter what the cut is, is a huge, huge part of the services narrative.

Right. But the question that, you know, okay, so if you take a step back, the question is, why does Apple get to charge these exorbitant rents to people just for the very like fact that they can. use the operating system that Apple has built. I'm going to read something that you actually called out in a recent blog post about the way that Steve Jobs viewed this thing. He said, our philosophy is simple. When Apple brings a new subscriber to the app, Apple earns 30% share. When the publisher brings an existing or new subscriber of the app, the publisher keeps 100% and Apple earns nothing.

So why, I mean, first of all, like Apple, when they first started this stuff, already we're basically laying out the fact that Apple taking 30% off of everything would be unfair. why do you think it's it's uh tenable for apple to take that 30% if they if it is and then why do you think they're deviating so much from that original strategy that jobs laid out yeah i mean so that was it was funny i stumbled upon that um statement because someone had shared a former colleague jason kinkade who used to work with me at tech crunch we used to go back and forth i was a pro apple person he was sort of anti apple person and so we had these blog posts that would go back and forth about takes on their various announcements at the time and it was almost

10 years ago that Apple rolled out in app subscriptions, which is at sort of the heart of what we're talking about now. And the quote you just read from Steve Jobs was in the press release when they announced this. And it was a big enough deal that Jobs himself gave a quote about it. And that quote is, you know, important, obviously, in what we're thinking about. Now, Apple would say that, look, it's still the same as it was back then because, you know, you can still bring your own user base to the service. And, you know, we're not taking a cut of that. Like, with, you know, with Netflix, for example. Things have changed, though, quite a bit, as you know.

Like, it used to be that you could sign up within Netflix, or sorry, within the Netflix app. And then, yeah, Netflix would pay that 30% cut to Apple. Or if you signed up on the web, they didn't pay that 30% cut. And again, philosophically, Jobs thought that that was the right thing to do. What's changed, of course, is that Netflix decided they were going to pull out of that agreement. And I don't think you can sign up currently through their,

iOS app so you have to sign up on the web. But the crazy thing is, Netflix can't tell you that you can't sign up on the web. They can't say anything about that per Apple's terms of service or otherwise the Apple will be blocked and they won't be able to have it in the app store. And that's where I think this really sort of irks me and a lot of people. I don't think that Apple, while they might be sort of explicitly following the letter of what jobs said back then, I don't think they're following the intent of what was implied by what he was saying. To me, it all reads, if you go back and read those quotes, I think he's basically saying, like, look, we're launching this new in-app purchase service because we're trying to make the best user experience for people to be able to transact

within our apps and on our devices. And we think that we can create a better experience for those users using what at the time was the iTunes Rails to be able to pay for these subscription services. And now it's obviously all run through the app store. But, and, you know, if you feel like if you're a service that brings in your own users a different way, you know, and you can do that, that's great. You get to keep all that money. And if they choose to use our, you know, rails to do it, then we'll take that 30% cut. And we can talk about the 30% cut itself in a second. But I just think that Apple has deviated from that sort of mentality.

And now it's all just like, how do we make sure that they are taking, that we are getting that 30% cut? and they are signing up via, you know, our mechanism. So it feels like they're not so much competing on having the best experience or product necessarily anymore. They're competing on obfuscation and trying to make it confusing and or just like impossible to sign up, you know, while I noted like Netflix was the one, it seems like that pulled out. It's extremely user hostile. Yeah.

Exactly. Right. And, but, you know, I think there were other reasons behind that, like why they pulled out. And yeah, I mean, I think that it's the mentality is just changed over the past. That's right. Now, the argument for Apple being able to charge that 30% cut is that, you know, it's almost like you built the store and then, uh, there's a company that wants to come and sell products in your store. What right do they have to be able to go and do that for free? Um, so, so where do you land? Is the 30% cut fair or unfair? So to me, that boils down to, I think that when it launched, it was fair enough. I think it came from a weird place, right? Like you can look back again, the reports of the time. And you can basically, you know, deduce how they got to it. It more or less seemed like it was a combination of what Apple was charging for iTunes individual songs at the time,

right? So they had the 99 cents songs via iTunes Music Store and they would take a 30% cut of each of those songs. And so I think jobs on down just looked in and said like, yeah, let's just keep it simple and do the same thing with apps. And, you know, they started with obviously doing that with paid apps, and then there became in-app purchases, and then there became subscriptions, and now it's sort of the standard thing. And now, of course, Apple is pointing like, look, this is, this is not just us. This is an industry standard. Where I beg to differ on that is I think that Apple should be leading by example here again. Like, yes, it might be sort of the standard because they sort of set it that way. And Google and everyone else now

uses that same standard and some of the other video game councils and whatnot now are all sort of on the same standard. But I think Apple is in a position, certainly as a $2 trillion company and as one of the biggest companies in the world, to be able to say, like, we want to do things a little bit differently. Look, we recognize that 10 years ago, when we set out to do this, you know, there were businesses that we could not have imagined that would be built on top of the app store. And that's amazing.

And, you know, Apple deserves credit for that, certainly. But I think that they should get a lot more granular in terms of how they support those types of businesses and recognize that not every type of business necessarily should, you know, be taken a 30% cut of their revenue out of. And I know that they've, they've changed it slightly over the years, right? They have the 30% sort of finder's fee that can morphs into a 15% thing in year two and whatnot. But some of that was just because of back-end deals that they cut with some of the other bigger players like Amazon. And then they felt like probably some level hypocrisy if they didn't offer it to everyone. But there's still a lot of hypocrisy going on behind

the scenes. Everyone knows that. That they cut certain deals. and, you know, there's like whispered meetings that happen behind the scenes, you know, to make sure that, you know, all sides are sort of, you know, working together, even though it's not in the most transparent way possible, that say like a little developer who's doing a single app, you know, doesn't have sort of the same type of white glove experience. And so, again, I just go back to the idea that these rules were set in place a decade ago. The world is very different than it was a decade ago.

And certainly the mobile world is very different than it was a decade ago. and the app ecosystem and everything that Apple's helped create again. I'm not saying that they need to give this stuff away for free and they don't deserve any sort of, you know, credit and fee for doing this. They absolutely do. I just think it needs to be a lot more granular and I think it needs to be rethought from the ground up for the 2020 world, not to 2010 work. Yeah, I would agree with you.

And I think that like when it comes down to it, this is more of a quite, okay, Apple and Epic will have their fight and their power plays and things like that. But we're also going to come out down to the point where like, how is this going to impact the actual people that buy the devices? So we could talk all day long about whether it's fair for the developers. But at the end of the day, how are people who are going to be paying for Apple phones going to feel when they can't use some of their favorite apps on it? I think you wrote about this. No, you did write about this as well. Here's another thing I want to read. You wrote with seemingly each passing week, Apple is eroding that relationship with developers, things to move like this one.

And if that continues, at some point, it has to change the other side of the equation as well. users may not want to walk from the products they know and love, but they will if the apps they know and love just aren't there. So what sort of risk from like severing a relationship with its own customers is Apple running when it makes moves like this? Yeah. So it's interesting in the context of what we were talking about because like, you know, when we were first like writing about and reporting about a decade ago when they launched some of these, these things like the in-app purchase, you know, people were saying the same things at the time. Like I mentioned, Jason Kincaid, he was saying, like, this is the risk of all of this

that, you know, that developers end up balking at the payment structure and then they walk and then users follow. Obviously, that hasn't really happened over the past decade. And the question is, why is it happening now? And I feel like there's a number of reasons. And I feel like they're all interrelated things from the tech clash in general on down. And these companies being called in front of Congress and everything, I think is all emboldening some of the other key players in the space, players like Epic and Facebook and everyone else that we've talked about, even though Facebook is, of course, on sort of both sides here as one of the big behemists also. But, you know, I think it's just emboldening

some of the other players that necessarily wouldn't have been able to speak up or didn't feel like they could speak up in the past and now feel like they can. And I do think that there's a risk that this can start to snowball on Apple. And we're already seeing it now that we don't have feature parity for Fortnite. And I don't think that that necessarily breaks, you know, the camel's back. But I think that if that plus another, you know, major app, say all of a sudden you can't use Spotify on the iPhone, I think that that would be a massive deal. If you can't use Netflix on the iPhone, that would be a massive deal.

and all those things combined would be a really big deal. And that could actually lead to some change. And I mean, you know, maybe a year ago, certainly five years ago, would have seemed inconceivable that that could possibly happen. But things are sort of moving in that direction more and more. And so that's why I feel like Apple, at some point, you would hope, has to recognize that. And that's why I do believe that they will ultimately start to move a little bit on and make some of these changes. The question is how transparent are they going to be about that? and how much are they going to work with everyone,

not just sort of some of the bigger developers behind the scenes. And to Epic's credit, they've said that they don't want to be the ones, you know, that are getting the special deals, you know, obviously that's a bit self-serving and who knows, you know. It has to be everyone.

Yeah. Right. They're saying it has to be. I've been surprised that no one else has stood up and said, you know, we're going to do this too. Like all these other companies voiced support, but would it make a similar move that Epic did.

I wonder what would happen if it wasn't just Epic, but it was all the companies that voiced their discomfort with Apple's policies like Netflix, like Facebook, like Tinder. I mean, the list goes on. Yeah. And I mean, I think that Epic is, I think there have been reports that they've been talking to these folks and they're trying to create sort of maybe a coalition, you know, obviously it's a there's fine lines to skirt with the reality of that.

Yeah. But I think that, you know, I think that they would prefer that others came with them. And, yeah, also not just fought with words, but also fought with actions. And the question really is, is Epic the first mover here? Or are they the only mover here? Because if they're the only mover here, they at some point will unfortunately lose the leverage, you know, that they might have, even with a game as big as Fortnite. And so I think it does have to be others coming to rally behind them in order to really make change. Okay.

Well, let's do a quick lightning round here towards the end. I mean, this is, I'm just kind of going to make this up off the file like I did with Casey Neu. and hopefully it will work out okay. I'll just give you some things, see if you can answer quickly. So the first one, are you still, you know, you mentioned you were pro that Kincaid was negative Apple on Apple. Are you still pro Apple? I'm still largely pro Apple, I think. I think that some of their moves recently are boneheaded.

I think that, again, they need to revisit some of those policies. But, you know, I still use Apple devices, you know, even though, as we noted in the Gitgo, obviously I work at a fund where our LP is, is, is, one of the rivals of Apple, but I still use Apple devices like more than any other type of device. And I love the products. And I just wish that they would sort of recognize and read the room better in terms of where they are right now in the ecosystem. Okay, great. Does a $2 trillion valuation make sense? I mean, they are, you know, an insanely profitable company, the likes of which we've never seen before, thanks to the iPhone. You know, I remember back in the day reporting on the race to

to beat Exxon as the most valuable company, right? And it seemed absurd that a technology company could beat an oil company. And now it seems, you know, like absurd in the other way. And so I don't know if two trillion is warranted. I mean, you know, I'm not, I'm not a public market investor that can sort of quantify how best to value these things off of future earnings and whatnot. But I do think, you know, they are in the best position to make the most amount of profits off of the user base that they, that they've been able to, to gather over time. And so, uh, if, if Amazon's one point six trillion, Microsoft's one point six trillion, I think, you know, seeing Apple at two trillion right now is, it makes sense in that capacity. But overall, it's all relative. Okay. All right. Way to

wiggle out of that one. Uh, is Apple still the biggest company in the world five years from now? I would, if I had to guess, I would say that Amazon is. Okay. Okay. That's great. And then from a market cap perspective. I'm with you on that. All right. Last question in the lightning round. Who wins Apple or Epic? Just if you had to, if you had to point your finger on it and just guess one of them, which one would it be? It's obviously going to be more nuanced than that. But I think that it directionally, directionally I'll say that I think that Epic ends up getting some of what they want. Okay. That's great. All right. We're going to go to one more break. We'll come back for five more minutes with M.G. G to talk a little bit about the work-life balance and the work balance and just where the economy is going in general. All right. Stick with us. We'll be right back.

Okay. We're back here for one more segment, quick segment, with M.G. Siegler of GV, formerly Google Ventures. He also writes the great analysis on Apple and other companies called 500-ish, which you could find, as he mentioned earlier, on 500ish.com and medium. Did I get that right, MG? Yep, that's all right. Okay, great.

So just a few quick questions before we end. You are a prolific writer and you're also working as a partner in a VC firm. How do you balance it all? So, yeah, I mean, I've been on the VC side of things almost 10 years now, which is sort of crazy to think about. It was actually longer than I was ever a reporter. And I sort of stumbled into reporting just because I was working as a web developer and I always loved writing. And so I was just writing on the side of. about technology. And that caught the eye of people at Venture Beat and other places. And so,

you know, they sort of asked me to come over and see if I would be willing to do this full time. At the time, I thought there was, there was no way you could sort of make a living, just blogging about technology. And then, of course, that took me to San Francisco and led me indirectly to where I am now. But the balance of it now, you know, I was worried about it 10 years ago. But ultimately, I've recognized that the writing is important to what I do because it really clarifies my own thinking about things. And it also is, you know, in a way it brings in interesting people who who learn my perspective on things. And even if it's not necessarily about like their company or what they're doing, I think that it helps clarify my line of thinking just like it does

for myself. And so it's a good balance that I've been able to strike. It's taken a long time and it's not easy to maintain. But I like where I'm at now. Yeah. It reminds me a little bit about the six pages in Amazon where like in order to clarify their thinking on new products they want to build, they write it all down and it helps you spot gaps in the way you wouldn't if you were just playing around with it in your brain or doing a PowerPoint. So it seems like that that's working out well for you. I've always respected that about Amazon for sure. What's it like investing today?

I mean, what are you seeing coming through the pipeline is the economy in the middle of the coronavirus, you know, in the tech world somewhat similar to what you were seeing before or is it changed in a dramatic way? It definitely took a pause for a little bit when COVID hits, mainly because, you know, I think everyone at a VC fund, you have a lot of portfolio companies and no one was new what was going to happen, right? And so we had to do a lot of work with the current portfolio companies to look inward and figure out how we batten down the hatches and help keep companies afloat. And in some cases, you know, unfortunately, companies had to win under. Obviously, there have been a lot of layoffs across the board. for all sorts of different types of companies. But other companies, you know, have been able to use this time to figure out both what they really need to focus on more and others are using it to create new companies. And, you know, there's obviously a lot of different spaces that are taking sort of

unique approaches to the current world that we're in, obviously, from Zoom on down with video conferencing, you know, remote work from Slack on down. and so there's all sorts of trickle-down effects that are that are maybe we're hard to see at first, but there's a, we just went through the latest Y Combinator batch of companies. There's, you know, nearly 200 companies that launched out of there. And a lot of them are focused on a lot of the world in which we live now for, yeah, remote working, for video, for all different sorts of things that are just, just a different environment.

So it's, it's very different than it was a year ago in terms of just overall feel. You obviously can't go and meet with companies and put. person anymore, unfortunately. And so that makes the job a little bit harder, but there's opportunities in it too. And so I think everyone is getting their footing back to sort of figure out what those opportunities are at this point. Okay. And that's sort of a great segue for me to ask the last question I wanted to ask, which is about Slack, a company you've invested in. I have the perspective that Slack can be negative for some organizations and mostly that CEOs will end up cracking down on it because, you know, they see it as something that takes away any hesitation

you have in normal communication and you end up fighting with your coworkers and saying things you wouldn't say. And CEOs are spending a lot of their time responding to drama versus like actually working on getting stuff done. Obviously, there's like a positive component for workers being able to voice their opinions in ways they couldn't before and organize. But if you think about it from a CEO perspective, sometimes it can be a bit of a mixed bag. So when you acknowledge that there are some of these issues inside Slack and how do you think it gets through them or do you think it's just going to be part of working from now on? Yeah, so I read, you know, your Slacklash newsletter. And, you know, I would say that it's,

of course, not the first Slackash. There have been multiple Slacklashes. It's such a great, it's such a great word that slots them so nicely with that. But yeah, I mean, I, my viewpoint on this, And as you note, sort of obviously I have my own biases. I was an investor in Slack when it was still a private company. I was a board observer there. And, you know, we remain investors in Slack, but I don't have any inside information about what they're doing these days. But I would say, you know, taking a step back, it looks like that these are challenges and opportunities, you know, for new companies that are emerging like Slack. And I think that you're seeing in the world that we were just talking about in the COVID world,

you know, Slack has been a very, very positive tool for many companies because how on earth are you going to operate communications-wise if you don't have a tool like Slack? But there are real side effects of people being connected all the time and being in, you know, channels and all of these new paradigms that Slack has helped create and how you do that. To me, it boils down to, I think you need to have a culture that's not. led from the top that, you know, instills the right sort of elements to make sure that that employees are treating each other respectfully. And I don't think that this is unique to Slack. I think that this is, you know, something that you've seen in the past over email, you've seen over IM and all the other tools. And, you know, Slack's not going to be the last of them either. You'll see things in the future. I'm sure that that have some of the same challenges. I do think it's a unique time because,

again, we're living in a world where we're all remotes. And these are the tools that are being used more than ever and it's faster perhaps than it ever has been over a tool like email, which is good and, you know, and has side effects to it too, which are playing out now, sort of as you're noting. But again, I think that the companies will figure this out. I think that, you know, this is something that, again, has to be led from sort of the top down from a culture perspective to make sure that that people are treating each other with respect and that communications lines remain open and that dialogue remains open. And, you know, I think that people will figure that out. This is the early days of these types of new tools. And again, I have to wonder what it was like, you know, back in the

day when email rolled out within organizations and, you know, were people up in arms, were managers up in arms because no one was talking to each other as much in the office anymore or, you know, people were taking advantage of being able to communicate sort of at night versus just in the office environment. So I think that all of these things have different nuances to them, given that they're different technologies. But this is the latest one. That's right. And maybe the real problem was the BlackBerry, not just the software. It was an expectation that you'd be online at all time. I know. Okay. We'll take it. We'll take it. Well, MG, it's really been a pleasure, a great nuance perspective that you've been able to bring to the show. And, you know, for me,

it's just been personally great to be able to, you know, shoot the shit with. you about Apple after reading so much of your work over the past couple of years. So I really do appreciate you joining us. Folks, make sure to go out and subscribe to MG's newsletter or follow them on Medium, get them on Twitter. You're probably already there yet. Probably already there already. But MG really want to say, thanks again. It was really great having you on. Yeah, thanks so much, Alex. It was a fun conversation. All right, folks. Well, if you enjoyed the conversation, please give us a rating on your podcast app of choice and subscribe, most importantly. we will be back next week with another episode and thanks always for listening.